Crypto markets are stabilizing after days of massive sell-offs.

The German government address transferred more than 10,000 bitcoins it held to crypto exchanges and market makers in several batches. The price of bitcoin once fell below $55,000. However, Arkham Intelligence data showed that during the closing of the U.S. stock market (corresponding to around 01:56AM on Tuesday morning Beijing time), the German government address received 2,898 bitcoins returned by the exchange, equivalent to approximately $163 million, mainly from Coinbase, Kraken and Bitstamp.

The exchange is likely returning the Bitcoin because it is unable to sell it within the target price range.

Considering that some Bitcoins have been returned from Coinbase to the German government address, it can be assumed that they are unsold Bitcoins that were part of a sales agreement between the cryptocurrency exchange and the country.

Is the impact of Dezi’s selling pressure exaggerated?

Dezi is nearly halfway through his sell-off, and since he started selling last month, his BTC holdings have dropped from nearly 50,000 to 27,461, with a current holding value of $1.5 billion.

Recent industry headlines have focused on events such as government sell-offs and MtGox refunds, which many believe are the main reasons for the recent Bitcoin crash.

But it is worth noting that the actual market value of Bitcoin that has flowed into the market since 2023 (that is, the value of Bitcoin bought and sold) is as high as $224 billion. In contrast, the Bitcoin seized and subsequently sold by governments including the United States and Germany is only about $9 billion. This accounts for only 4% of the total actual market value since the beginning of 2023.

Despite the huge notional value, the amount of Bitcoin actually transferred to exchanges is only in the hundreds of millions of dollars, indicating that the actual impact of government-seized Bitcoin on the market and the excess supply is relatively small. This suggests that while sales of seized assets are important in individual transactions, their overall impact on market dynamics and Bitcoin price stability is not as large as it might initially appear.

The main reason for the repeated decline of the market is the spread of panic, coupled with the seasonal weakness of the entire market and the problem of insufficient liquidity.

BTC may have reached a local bottom

The funding rate for BTC perpetual swaps turned negative for the first time since hitting a bottom on May 1.

Historically, periods of negative funding rates combined with low short-term SOPR values ​​(a measure of the profits or losses realized by a particular group of investor wallets on a given day) have typically marked the bottom of price corrections.

This could be seen as a buildup of bearish sentiment, but it also reinforces the idea that BTC could be stabilizing or approaching a potential bottom as the balance of buy and sell pressure evolves. Negative indicators indicate that selling pressure is high or sellers are dominating the market, but can also indicate that the market is oversold. When such oversold conditions coincide with a pick-up in the SOPR, it often indicates that the market is bottoming.

The RSI indicator shows that Bitcoin has entered oversold conditions for the first time since August, just before an upside squeeze. For Bitcoin to gain further momentum, the price needs to break through $58,500, while a break above $60,500 would mark a return to bullish territory.

The current pullback is only temporary, as miners and governments sell off their Bitcoin inventories, Bitcoin is currently in a correction range, but I believe long-term investors and speculators will continue to buy on dips. There is no reason to change the target of $100,000 Bitcoin by the end of 2024.

While the crypto asset investment space has seen significant outflows in recent weeks, the reverse is now happening, with inflows totaling $441 million in the last week alone. Despite recent market conditions, the inflows recorded over the past week suggest that many may view the recent decline as a buying opportunity for investment rather than a signal to retreat.

This week, there has been widespread inflow of funds to buy BTC, and other Crypto assets such as ETH and SOL have also received great attention. BTC still leads the way with a scale of US$384 million.

Meanwhile, major investment firms such as ArkInvest, Fidelity and BlackRock have noticed similar inflow trends.

The Bitcoin Miner Capitulation Indicator is approaching levels seen during the market bottom following the FTX crash in late 2022, suggesting that BTC may have bottomed. Miner capitulation occurs when miners reduce operations or sell a portion of their mined Bitcoin and reserves to survive, earn a profit, or hedge their Bitcoin exposure.

Several signs of capitulation have emerged over the past month, during which the price of Bitcoin has fallen from $68,791 to $53,550. One notable sign is the significant drop in the Bitcoin hash rate (the total computing power securing the Bitcoin network).

The hash rate fell 7.7% to a four-month low of 576 EH/s after hitting an all-time high on April 27. The drop suggests some miners are scaling back operations, reflecting financial pressure on the mining community following the halving.

As weaker miners exit the market or scale back operations, more competitive miners will see greater profits, potentially stabilizing their operations and reducing the need to sell BTC. These indicators suggest that the Bitcoin market may be near a bottom, similar to previous cycles where miners sold off and operations decreased before the market recovered.

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